Organizational Culture and its Impact on Continuous Improvement in Manufacturing

N. Muthukumar, K. Ganesh, Sanjay Mohapatra, K. Tamizhjyothi, R. M. Nachiappan

• Publisher: Emerald Publishing Limited
• Year: 2022
• ISBN:
  9781802624052
• Topic: Negocios y empresa
• Subtopic: Comportamiento organizacional

As manufacturing companies become global, excellence will be key to the survival of Indian manufacturing businesses. Despite India's good performance on the export front in recent years, India is being outperformed by its competitors. Indian manufacturing companies must compete with global companies and become world class organizations to be competitive.

Organizational Culture and its Impact on Continuous Improvement in Manufacturing presents detailed insights into recent studies, providing solutions that can be scaled up at a global level. The lack of competitiveness of Indian companies is attributed to culture in the organization as well as an inability to introduce world class manufacturing tools which would allow them to become globally competitive.

All the qualities needed to become world class are not currently available, and it is imperative to understand this gap through the detailed research this book presents to ensure India's manufacturing companies can compete.

Chapter 1

Introduction

1.1 Impact of Globalization

Consequent to globalization, in recent times, manufacturing companies have been passing through a critical phase of high competition. Under these circumstances of stiff competition, the consumer is the ultimate decision-maker for any product based on their dependability, availability and overall value that the consumer perceives. Hence, in order to win the customer's favour, it is imperative that each company is compelled to meet and beat the best ones from anywhere in the world. Traditionally, product pricing was based on the manufacturing costs and the profits were fixed by stakeholders commonly known as cost-based pricing. However, during post globalization, customers, being interested in continuous price reduction, fix the price on the basis of maturity of the product cycle, that is, introduction, growth, maturity or decline. Customers decide the price reduction in the scale of 5, 4, 3, 2 and 1. That is, at the end of the first year, they want 5% reduction from its initial price; at the end of the second year they want 4% reduction, and so on. In this manner, customers fix the product price and the stakeholders fix the profit either keeping constant or in increasing trend. As shown in Expression 1.1 (Anantharaman & Nachiappan, 2006; Ravichandran, 2005), cost is the only parameter to be controlled and managed by the managers of the organization to decide upon the price of the product – ‘Price-based costing’.

Expression 1.1 Cost Equation.

Cost-based Pricing:
Cost + Profit = Price
Manufacturing cost	Profit fixed by stakeholders	Market is price taker. Market has no influence on price
Price-based Costing:
Price − Profit = Cost
Global market expects decreasing price	Stakeholders require increasing returns	Continuous pressure to reduce by effectiveness in manufacturing

Once design is frozen and a product is industrialized, usually major cost sits on manufacturing activities as input material and conversion cost alone account for 80–85% of a product cost. Serious cost reduction is necessary to reduce the price and to remain competitive in the global market, and this can be accomplished by taking measures to improve the manufacturing system of the product (Farsijani & Carruthers, 1996). Therefore, it is now increasingly necessary for engineers and managers to give more attention to improving the process of manufacturing in order to remain relevant. Furthermore, in contemporary highly challenging environment, an economic production system has been identified as a crucial factor for competitiveness (Pintelon, Pinjala, & Vereecke, 2006).

1.2 Manufacturing

Manufacturing operation is one of the prime strategic functions of any business (Yamashina, 2000). It is an economic term that refers to making goods and offering services to satisfy human wants (Black, 2002). It implies value created by applying useful mental or physical labour. It is a process of adding value to the raw materials and resources, and therefore, it should be considered as the heart of economy in an organization. It is an essential process of creation with a purpose (Sinha, 1997).

The original meaning of ‘manufacture’ is to make things by hand. However, at present, the meaning has quite widened. ‘Manufacturing’ is the conversion of a design into a finished product. Production has a narrower sense, namely, the physical act of making the product. Manufacturing has a history extending several thousands of years and comprises the following three important features:

• Providing basic means of human existence: Without manufacturing or production of goods, a human being cannot live, and this is increasingly so in modern society.
• Creating wealth of nations: Manufacturing creates the wealth of a country or a nation.
• Promoting human happiness and world peace: An affluent and prosperous country can provide security, welfare and happiness to its people. Such a country no longer needs to invade other countries or to wage war and consequently, manufacture of weapons will stop, and it will result in world peace.

The overall manufacturing and its process flow has been illustrated in Fig. 1.1. Inputs like material and energy go through manufacturing process and get transformed into finished products for customers.

Fig. 1.1. Manufacturing and Its Components.

If the products or services of a manufacturing system have to reach customers, it has to be flexible enough to comply with changes tailored to meet the customers' demands and desires (taste). The arrangement and operation of machines, tools, materials, people and information to produce a value-added physical entity or service is characterized by a measurable parameter called performance measure (Cochran & Dobbs, 2002). Depending on the maturity of manufacturing systems in an organization, manufacturing excellence can be ranked at various levels. World class manufacturing (WCM) level is considered as the highest level of manufacturing excellence. The following section explains more about WCM.

1.3 World Class Manufacturing

In the era of globalization with major players from all over the world, the term world class is appropriate. WCM is a term widely recognized in manufacturing, encompassing a wide range of activities. WCM implies that it has the ability to compete in globally competitive market. It is considered the best system in the world in terms of production and operation capability. The term WCM implies the pursuance of best practices in manufacturing (Miller, 1991).

Schonberger (1986) has described WCM as analogous to the Olympic Games motto – citius, altius and fortius (faster, higher and stronger). It is described as a collective term for a number of production processes and organizational strategies, which have flexibility as their primary concern (Haynes, 1999). Gunn (1987) strongly emphasizes on the role of technology in WCM, and Hall (1983) stresses that WCM is a fundamentally different way of operating an organization. Giffi, Roth, and Seal (1990) view quality and customer as the primary focus of WCM, supported by a combination of manufacturing strategies and capabilities, organizational facts and human assets. Hayes and Wheelwright (1985) emphasize that it is necessary to have the capability to be a superior competitor to define world-class manufacturing. Fujio Cho, chief engineer of Toyota Corporation, states as follows: ‘Waste is anything other than the minimum amount of man, machine, material, parts and space which are absolutely essential to add value to a product’. Womack, Jones, and Roos (1990) have stated that WCM uses less of everything – ‘half the human effort, manufacturing space, tools and money’. Also, it requires less than half the inventory on site, leads to a few defects and produces a greater and ever-growing variety of products.

1.3.1 Objectives of WCM

WCM rediscovers the vital role played by zero in manufacturing management. When the manufacturing companies march towards perfection (the zero stage), a whole new range of exciting possibilities are thrown open like zero break down in maintenance, zero defects in process, zero accident and so on (Fig. 1.2). The zero target demands a radical change in the mind-set of people about the operational life (Beck, 1989).

Fig. 1.2. Goals of WCM.

Experience suggests that the means adopted to achieve these ends are vital as the ends themselves. In the pursuit of zero approach, Japanese firms have graduated from Parts per Million (PPM) defects scale to Parts per Billion (PPB). It can be achieved by the implementation of CI tools in manufacturing.

1.4 Continuous Improvement

Continuous improvement (CI) is defined as a systematic effort to seek out and apply new ways of doing work by actively and repeatedly making process improvements. Process is nothing but sequences of tasks aimed at creating value-adding transformations of inputs – material and information – to achieve intended outputs (Upton, 1996). CI involves establishing customer requirements (internal or external), meeting the requirements, measuring success and continuing to check customers' requirements to find areas in which improvements can be made (Chang, 2005). CI is an ongoing activity aimed at raising the level of organization-wide performance through focused incremental changes in processes (Bessant & Caffyn, 1997; Wu & Chen, 2006). CI initiative implies bundles of practices, such as prescribed sequences of steps for carrying out projects and sets of tools and techniques commonly used to execute these projects (Handel & Gittleman, 2004; Pil & MacDuffie, 1996). Furthermore, several studies also identify the importance of CI, as a part of quality management practices, in the sense of its contribution to the organizational/manufacturing performance (Cua, McKone, & Schroeder, 2001; Douglas & Judge, 2001; Kaynak, 2003; Sila, 2007; Terziovski & Samson, 1999).

Companies aim to achieve continuous improvement capability through the deployment of continuous improvement tools such as lean management and Six Sigma (Voss, 2005). The underlying foundations are seen to be a culture for innovation, focusing on critical processes and the involvement of employees, together with the integration of improvement activities throughout the organization.

1.5 WCM Awards and Winning Criteria

From the growth of technology and shifting customer expectat...

Table of contents

• Cover
• Title
• Copyright
• Table of Contents
• List of Figures
• List of Tables
• List of Abbreviations
• About the Authors
• Chapter 1 Introduction
• Chapter 2 Literature Review
• Chapter 3 Research Methodology
• Chapter 4 Analysis and Discussion
• Chapter 5 Findings, Suggestions and Conclusion
• References
• Appendix 1 Manufacturing Company Culture Survey Questionnaires
• Appendix 2 About Confederation of Indian Industry (CII)
• Index